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CHAIRMAN’S DELIVERING MSM MANAGEMENT DISCUSSION GROUP FINANCIAL
STATEMENT VALUE OVERVIEW & ANALYSIS REPORT

NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Financial assets (continued)
Impairment (continued)
(d) Groupings of instruments for ECL measurement
(i) Collective assessment

To measure ECL, trade receivables and contract assets arising from the Group have been grouped based on
the days past due and shared credit risk characteristics as follows:
152 (i) Geographical region of customers
(ii) Customer division
MSM MALAYSIA HOLDINGS BERHAD Annual Report 2020
(iii) Related company and external customers
(iv) Other shared credit risks
The contract assets relate to amounts due from customers on contracts and unbilled work in progress and
have substantially the same risk characteristics as the trade receivables for the same types of contracts.
The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable
approximation of the loss rates for the contract assets.

(ii) Individual assessment
Trade receivables which are in default or credit-impaired are assessed individually
Other receivables, loans and amount due from intercompany, are assessed on individual basis for ECL
measurement, as credit risk information is obtained and monitored separately.
(e) Write-off
(i) Trade receivables
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is
no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment
plan with the Group.
Impairment losses on trade receivables are presented as net impairment losses on the face of profit or loss.
Subsequent recoveries of amounts previously written off are credited against the same line item.

(ii) Other debt instruments
The Group writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and
has concluded there is no reasonable expectation of recovery. The assessment of no reasonable expectation
of recovery is based on unavailability of debtor’s sources of income or assets to generate sufficient future
cash flows to repay the amount. The Group may write-off financial assets that are still subject to enforcement
activity. Subsequent recoveries of amounts previously written off will result in impairment gains.
(f) Subsidiaries

An impairment loss is recognised for the amount by which the carrying amount of the subsidiary, joint venture or
associate exceeds its recoverable amount. The recoverable amount is higher of an asset’s fair value less costs of
disposal and value-in-use. Any subsequent increase in recoverable amount is recognised in profit or loss.